EX-99.1 2 a05-18948_1ex99d1.htm EXHIBIT 99

Exhibit 99.1

 

 

Bank of Hawaii Corporation Third Quarter 2005 Financial Results

 

•      Diluted Earnings Per Share $0.85; Net Income $44.8 Million

•      Board of Directors Increases Dividend to $0.37 Per Share

 

FOR IMMEDIATE RELEASE

 

HONOLULU, HI (October 24, 2005) — Bank of Hawaii Corporation (NYSE: BOH) today reported diluted earnings per share of $0.85 for the third quarter of 2005, an increase from diluted earnings per share of $0.78 in the third quarter of 2004 and a decrease from $0.87 in the second quarter of 2005.  Net income for the third quarter of 2005 was $44.8 million, up $1.8 million from net income of $43.1 million in the third quarter of 2004 and down $1.6 million from net income of $46.4 million in the second quarter of 2005.  Net income for the third quarter of 2005 included a provision for credit losses of $3.0 million ($1.9 million after tax or $0.04 per diluted share).

 

Return on average assets for the third quarter of 2005 was 1.74 percent, compared to 1.77 percent in the third quarter of 2004 and 1.87 percent in the second quarter of 2005.  Return on average equity was 24.61 percent for the third quarter of 2005, up from 23.42 percent in the same quarter last year and down from 25.98 percent in the previous quarter.

 

“We are pleased with Bank of Hawaii Corporation’s financial performance for the third quarter of 2005,” said Allan R. Landon, Chairman and CEO.  “We increased revenue, loans and deposits, and maintained reasonable expense levels.  Although we returned to provisioning for credit losses during the quarter, our credit quality and the Hawaii economy remain strong.”

 

For the nine months ended September 30, 2005, net income was $136.8 million, up $9.7 million or 7.6 percent from net income of $127.1 million for the same period last year.  Diluted earnings per share were $2.55 for the first nine months of 2005, an increase from $2.26 for the first nine months of 2004.  Year-to-date results for 2005 include the previously mentioned $3.0 million provision for credit losses compared to a return to income of $3.5 million in the same period last year resulting from the release of a portion of the allowance for loan and lease losses.

 

The return on average assets for the nine months ended September 30, 2005 was 1.83 percent, up from 1.74 percent for the same period in 2004.  The year-to-date return on average equity was 24.72 percent, up from 22.48 percent for the nine months ended September 30, 2004.

 

- more -

 

130 Merchant Street • PO Box 2900 • Honolulu HI 96846-6000 • Fax 808-537-8440 • Website www.boh.com

 


 

Financial Highlights

 

Net interest income, on a taxable equivalent basis, for the third quarter of 2005 was $102.0 million, up $3.2 million from $98.8 million in the third quarter of 2004 and up $0.9 million from $101.1 million in the second quarter of 2005.  The increase in net interest income was largely due to growth in loans and higher average yields on the investment securities and loan portfolios.  Partially offsetting the positive increase in interest income was an increase in interest expense resulting from selective rate increases on interest-bearing deposits.  An analysis of the change in net interest income from the previous quarter is included in Table 6.

 

The net interest margin was 4.30 percent for the third quarter of 2005, a 9 basis point decrease from 4.39 percent in the prior year quarter and a 6 basis point decrease from 4.36 percent in the second quarter of 2005.  The decrease in the net interest margin compared to the previous quarter was largely due to a higher level of liquidity.  The decrease in the net interest margin compared to the same quarter last year was largely due to the effects of the flattening yield curve.

 

As previously mentioned, the Company recorded a provision for credit losses of $3.0 million in the third quarter of 2005.  Charge-offs during the quarter of $15.3 million included a $10.0 million write-off of a fully reserved aircraft lease and were partially offset by recoveries of $2.3 million. The Company did not recognize a provision for credit losses during the third quarter of 2004 or during the second quarter of 2005.

 

Non-interest income was $55.5 million for the third quarter of 2005, an increase of $2.5 million or 4.6 percent compared to non-interest income of $53.1 million in the third quarter of 2004.  Non-interest income in the third quarters of 2005 and 2004 included gains of $3.4 million and $5.2 million, respectively, on the sale of assets at the end of leveraged leases.  Excluding these items, non-interest income increased $4.3 million or 9.0 percent over the same quarter last year.  Non-interest income increased $4.8 million or 9.6 percent compared to $50.7 million in the second quarter of 2005.

 

Non-interest expense was $84.6 million in the third quarter of 2005, up $0.4 million or 0.5 percent from non-interest expense of $84.2 million in the same quarter last year and up $5.6 million or 7.1 percent from $79.0 million in the second quarter of 2005.  Included in the third quarter of 2005 were previously announced charges of $3.8 million for legal and other expenses related to the mutual fund business.  An analysis of salary and benefit expenses is included in Table 7.

 

The efficiency ratio for the third quarter of 2005 was 53.72 percent, an improvement from 55.45 percent in the same quarter last year and up from 52.07 percent in the previous quarter.

 

The Company’s business segments are defined as Retail Banking, Commercial Banking, Investment Services Group, and Treasury and Other Corporate.  Results are determined based on the Company’s internal financial management reporting process and organizational structure.  Selected financial information for the business segments is included in Tables 11a and 11b.

 

2


 

Asset Quality

 

Overall asset quality remained strong and stable during the third quarter of 2005.  Non-performing assets were $8.3 million at the end of the third quarter of 2005, a decrease of $2.7 million, or 24.5 percent, compared to non-performing assets of $10.9 million at the end of the previous quarter and a decrease of $7.7 million, or 48.4 percent, compared to $16.0 million at the end of the same quarter last year.  At September 30, 2005 the ratio of non-performing assets to total loans, foreclosed real estate, and other investments was 0.13 percent compared with 0.18 percent at June 30, 2005 and 0.27 percent at September 30, 2004.

 

Non-accrual loans were $7.2 million at September 30, 2005, a reduction of $2.8 million, or 28.1 percent, from $9.9 million at June 30, 2005 and down $8.6 million, or 54.6 percent, from $15.8 million at September 30, 2004.  Non-accrual loans as a percentage of total loans were 0.12 percent at September 30, 2005, down from 0.16 percent at June 30, 2005 and from 0.27 percent at September 30, 2004.

 

Net charge-offs for the third quarter of 2005 were $13.0 million, or 0.84 percent (annualized) of total average loans, including the previously mentioned write-off of an aircraft lease.  Net charge-offs in the previous quarter were $3.7 million, or 0.25 percent (annualized) of total average loans.  In the third quarter of 2004, net charge-offs were $0.3 million, or 0.02 percent (annualized) of total average loans.  Net charge-offs for the first nine months of 2005 were $20.4 million, or 0.45 percent (annualized) of total average loans compared to $0.9 million or 0.02 percent (annualized) of total average loans in the same period last year.  Net charge-offs in the first nine months of 2004 included a $6.0 million recovery of a previously charged-off loan from the divested Asia business.

 

The allowance for loan and lease losses was $91.7 million at September 30, 2005, down from $101.6 million at June 30, 2005 and down from $124.7 million at September 30, 2004. The $9.9 million decrease in the allowance from the previous quarter was primarily due to net charge-offs.  The decrease from the previous year is largely due to net charges-offs, $6.5 million returned to income from releases of the allowance for loan and lease losses during 2004 and $6.8 million reclassified to other liabilities for potential losses related to unfunded commitments to extend credit.  The allowance for unfunded commitments was $4.5 million at September 30, 2005, down from $4.6 million at June 30, 2005.

 

The ratio of the allowance for loan and lease losses to total loans was 1.48 percent at September 30, 2005.  The decrease from the ratio of 1.65 percent at June 30, 2005 was largely due to the previously mentioned write-off of an aircraft lease.  The ratio of the allowance for loan and lease losses to total loans was 2.14 percent at September 30, 2004.  If the allowance for unfunded commitments had been reclassified at September 30, 2004, the ratio would have been 2.03 percent.

 

Credit exsposure to the air transportation industry is summarized in Table 8.

 

Other Financial Highlights

 

Total assets were $10.09 billion at September 30, 2005, up from $10.06 billion at June 30, 2005 and up from $9.59 billion at September 30, 2004.  Total loans and leases were $6.20 billion at September 30, 2005, up from $6.15 billion at June 30, 2005 and up from $5.82 billion at September 30, 2004.

 

3


 

Commercial loan outstandings were $2.20 billion at September 30, 2005, essentially flat with June 30, 2005 and up from $2.02 billion at September 30, 2004.  Strong commercial loan originations and advances during the third quarter of 2005 were offset by payoff activity.  Consumer loan outstandings were $4.00 billion at September 30, 2005, up from $3.95 billion at June 30, 2005 and up from $3.79 billion at September 30, 2004.  Growth in residential mortgage and home equity lending continues to be supported by robust construction activity and the strong Hawaii housing market.

 

Total deposits at September 30, 2005 were $7.76 billion, up from $7.73 billion at June 30, 2005 and up from $7.41 billion at September 30, 2004.  Non-interest-bearing demand and savings accounts balances decreased during the quarter as customers shifted funds to higher rate interest-bearing accounts and time deposits.

 

During the third quarter of 2005, Bank of Hawaii Corporation repurchased 762.7 thousand shares of common stock at a total cost of $38.8 million under its share repurchase program.  The average cost was $50.85 per share repurchased.  From the beginning of the share repurchase program in July 2001 through September 30, 2005, the Company has repurchased a total of 39.4 million shares and returned $1.3 billion to the shareholders at an average cost of $33.03 per share.  From October 1, 2005 through October 21, 2005, the Company repurchased 75.0 thousand shares of common stock at an average cost of $48.66 per share.  Remaining buyback authority under the share repurchase program was $46.6 million at October 21, 2005.

 

The Company’s capital and liquidity remain strong.  At September 30, 2005 the Tier 1 leverage ratio was 6.98 percent compared to 7.14 percent at June 30, 2005 and 7.69 percent at September 30, 2004.

 

The Company’s Board of Directors declared a quarterly cash dividend of $0.37 per share on the Company’s outstanding shares.  The dividend will be payable on December 14, 2005 to shareholders of record at the close of business on November 30, 2005.

 

Financial Outlook

 

Bank of Hawaii Corporation currently estimates net income for the full year of 2005 will be approximately $179 million to $181 million.  The Company performs a quarterly analysis of credit quality to determine the adequacy of the reserve for credit losses.  The results of this analysis determine the timing and amount of the provision for credit losses.

 

Conference Call Information

 

The Company will review its third quarter 2005 financial results today at 8:00 a.m. Hawaii Time (2:00 p.m. Eastern Time).  The presentation will be accessible via teleconference and via the Investor Relations link of Bank of Hawaii Corporation’s web site, www.boh.com.  The conference call number is 866-700-7477 in the United States or 617-213-8840 for international callers.  No confirmation code is required to access the call.  A replay will be available for one week beginning Monday, October 24, 2005 by calling 888-286-8010 in the United States or 617-801-6888 for international callers and entering the number 43957291 when prompted.  A replay of the presentation will also be available via the Investor Relations link of the Company’s web site.

 

4


 

Bank of Hawaii Corporation is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa and the West Pacific.   The Company’s principal subsidiary, Bank of Hawaii, was founded in 1897 and is the largest independent financial institution in Hawaii.  For more information about Bank of Hawaii Corporation, see the Company’s web site, www.boh.com.

 

Forward-Looking Statements

 

This news release, including the statements under the caption “Financial Outlook,” contains, and other statements made by the Company may contain, forward-looking statements concerning, among other things, the economic and business environment in our service area and elsewhere, growth in the lending portfolio, credit quality, anticipated net income and other financial and business matters in future periods.  Our forward-looking statements are based on numerous assumptions, any of which could prove to be inaccurate and actual results may differ materially from those projected for a variety of reasons, including, but not limited to:
1) unanticipated changes in business and economic conditions, the competitive environment, fiscal and monetary policies, taxing authority interpretations, legislation in Hawaii and the other markets we serve, or the timing and interpretation of accounting standards; 2) changes in our credit quality or risk profile that may increase or decrease the required level of reserve for credit losses; 3) changes in market interest rates that may affect our credit markets and ability to maintain our net interest margin; 4) unpredictable costs and other consequences of legal or regulatory matters involving the Company; 5) changes to the amount and timing of our proposed equity repurchases; 6) real or threatened acts of war or terrorist activity affecting business conditions; and 7) adverse weather, public health and other natural conditions impacting the Company and its customers’ operations.  We do not undertake an obligation to update forward-looking statements to reflect later events or circumstances.

 

# # # #

 

5


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Highlights (Unaudited)

 

Table 1

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

(dollars in thousands except per share amounts)

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

For the Period:

 

 

 

 

 

 

 

 

 

Interest Income

 

$

129,234

 

$

114,397

 

$

373,497

 

$

337,643

 

Net Interest Income

 

101,960

 

98,779

 

303,657

 

290,659

 

Net Income

 

44,829

 

43,067

 

136,780

 

127,098

 

Basic Earnings Per Share

 

0.87

 

0.82

 

2.62

 

2.40

 

Diluted Earnings Per Share

 

0.85

 

0.78

 

2.55

 

2.26

 

Dividends Declared Per Share

 

0.33

 

0.30

 

0.99

 

0.90

 

 

 

 

 

 

 

 

 

 

 

Net Income to Average Total Assets (ROA)

 

1.74%

 

1.77%

 

1.83%

 

1.74%

 

Net Income to Average Shareholders’ Equity (ROE)

 

24.61

 

23.42

 

24.72

 

22.48

 

Net Interest Margin 1

 

4.30

 

4.39

 

4.36

 

4.29

 

Efficiency Ratio 2

 

53.72

 

55.45

 

52.90

 

56.40

 

 

 

 

 

 

 

 

 

 

 

Average Assets

 

$

10,196,047

 

$

9,668,495

 

$

10,004,968

 

$

9,746,283

 

Average Loans and Leases

 

6,170,302

 

5,796,350

 

6,087,629

 

5,770,642

 

Average Deposits

 

7,833,638

 

7,479,776

 

7,756,789

 

7,390,682

 

Average Shareholders’ Equity

 

722,758

 

731,583

 

739,721

 

755,075

 

Average Equity to Average Assets

 

7.09%

 

7.57%

 

7.39%

 

7.75%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

 

 

 

 

 

 

2005

 

2004

 

At Period End:

 

 

 

 

 

 

 

 

 

Net Loans

 

 

 

 

 

$

6,110,892

 

$

5,690,924

 

Total Assets

 

 

 

 

 

10,085,235

 

9,594,809

 

Deposits

 

 

 

 

 

7,756,586

 

7,413,240

 

Long-Term Debt

 

 

 

 

 

242,692

 

252,619

 

Shareholders’ Equity

 

 

 

 

 

696,311

 

756,707

 

 

 

 

 

 

 

 

 

 

 

Allowance to Loans and Leases Outstanding

 

 

 

 

 

1.48%

 

2.14%

 

Dividend Payout Ratio

 

 

 

 

 

37.80

 

37.57

 

Leverage Ratio

 

 

 

 

 

6.98

 

7.69

 

 

 

 

 

 

 

 

 

 

 

Book Value Per Common Share

 

 

 

 

 

$

13.58

 

$

14.27

 

 

 

 

 

 

 

 

 

 

 

Employees (FTE)

 

 

 

 

 

2,591

 

2,655

 

Branches and Offices

 

 

 

 

 

85

 

88

 

 

 

 

 

 

 

 

 

 

 

Market Price Per Share of Common Stock for the Quarter Ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

Closing

 

$

49.22

 

$

47.25

 

 

 

 

 

High

 

54.44

 

48.07

 

 

 

 

 

Low

 

47.44

 

43.55

 

 

1       The net interest margin is defined as net interest income, on a fully-taxable equivalent basis, as a percentage of average earning assets.

 

2       The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Statements of Income (Unaudited)

 

Table 2

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

(dollars in thousands except per share amounts)

 

2005

 

2005

 

2004 1

 

2005

 

2004 1

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

Interest and Fees on Loans and Leases

 

$

94,381

 

$

90,119

 

$

82,079

 

$

270,967

 

$

243,853

 

Income on Investment Securities - Available for Sale

 

28,482

 

27,987

 

24,543

 

83,788

 

67,134

 

Income on Investment Securities - Held to Maturity

 

5,109

 

5,527

 

6,370

 

16,461

 

20,057

 

Deposits

 

57

 

36

 

496

 

116

 

3,373

 

Funds Sold

 

935

 

165

 

108

 

1,175

 

702

 

Other

 

270

 

271

 

801

 

990

 

2,524

 

Total Interest Income

 

129,234

 

124,105

 

114,397

 

373,497

 

337,643

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

15,766

 

13,577

 

8,990

 

40,947

 

26,750

 

Securities Sold Under Agreements to Repurchase

 

6,796

 

4,562

 

2,085

 

14,683

 

6,233

 

Funds Purchased

 

901

 

1,151

 

683

 

2,785

 

1,420

 

Short-Term Borrowings

 

50

 

45

 

15

 

127

 

43

 

Long-Term Debt

 

3,761

 

3,731

 

3,845

 

11,298

 

12,538

 

Total Interest Expense

 

27,274

 

23,066

 

15,618

 

69,840

 

46,984

 

Net Interest Income

 

101,960

 

101,039

 

98,779

 

303,657

 

290,659

 

Provision for Credit Losses

 

3,000

 

—

 

—

 

3,000

 

(3,500

)

Net Interest Income After Provision for Credit Losses

 

98,960

 

101,039

 

98,779

 

300,657

 

294,159

 

Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

Trust and Asset Management

 

14,052

 

14,058

 

12,672

 

42,732

 

39,531

 

Mortgage Banking

 

2,618

 

2,594

 

1,711

 

7,802

 

6,496

 

Service Charges on Deposit Accounts

 

10,046

 

9,569

 

9,472

 

29,794

 

28,962

 

Fees, Exchange, and Other Service Charges

 

15,394

 

15,211

 

13,741

 

44,441

 

41,223

 

Investment Securities Gains (Losses)

 

8

 

337

 

—

 

345

 

(37

)

Insurance

 

5,324

 

4,330

 

5,423

 

15,442

 

15,007

 

Other

 

8,074

 

4,575

 

10,035

 

17,949

 

25,562

 

Total Non-Interest Income

 

55,516

 

50,674

 

53,054

 

158,505

 

156,744

 

Non-Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Salaries and Benefits

 

44,366

 

43,856

 

46,566

 

132,991

 

139,256

 

Net Occupancy

 

9,896

 

9,189

 

9,812

 

28,630

 

28,741

 

Net Equipment

 

5,335

 

5,377

 

5,847

 

16,183

 

17,610

 

Professional Fees

 

5,689

 

2,905

 

3,428

 

11,645

 

10,632

 

Other

 

19,310

 

17,677

 

18,537

 

55,014

 

56,098

 

Total Non-Interest Expense

 

84,596

 

79,004

 

84,190

 

244,463

 

252,337

 

Income Before Income Taxes

 

69,880

 

72,709

 

67,643

 

214,699

 

198,566

 

Provision for Income Taxes

 

25,051

 

26,280

 

24,576

 

77,919

 

71,468

 

Net Income

 

$

44,829

 

$

46,429

 

$

43,067

 

$

136,780

 

$

127,098

 

Basic Earnings Per Share

 

$

0.87

 

$

0.90

 

$

0.82

 

$

2.62

 

$

2.40

 

Diluted Earnings Per Share

 

$

0.85

 

$

0.87

 

$

0.78

 

$

2.55

 

$

2.26

 

Dividends Declared Per Share

 

$

0.33

 

$

0.33

 

$

0.30

 

$

0.99

 

$

0.90

 

Basic Weighted Average Shares

 

51,385,840

 

51,873,772

 

52,390,081

 

52,221,345

 

53,053,770

 

Diluted Weighted Average Shares

 

52,844,961

 

53,403,781

 

55,472,868

 

53,745,612

 

56,297,277

 

 

1       Certain 2004 information has been reclassified to conform to 2005 presentation.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Statements of Condition (Unaudited)

 

Table 3

 

 

 

September 30,

 

June 30,

 

December 31,

 

September 30,

 

(dollars in thousands)

 

2005

 

2005

 

2004

 

2004

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Interest-Bearing Deposits

 

$

10,119

 

$

4,825

 

$

4,592

 

$

29,976

 

Investment Securities - Available for Sale

 

 

 

 

 

 

 

 

 

Held in Portfolio

 

2,381,462

 

2,396,204

 

2,483,719

 

2,328,327

 

Pledged as Collateral

 

172,500

 

117,947

 

—

 

—

 

Investment Securities - Held to Maturity
(Fair Value of $475,884, $522,993, $585,836, and $624,587)

 

485,041

 

526,767

 

589,908

 

630,276

 

Funds Sold

 

10,000

 

50,000

 

21,000

 

25,000

 

Loans Held for Sale

 

18,095

 

17,435

 

17,642

 

18,595

 

Loans and Leases

 

6,202,546

 

6,151,418

 

5,986,930

 

5,815,575

 

Allowance for Loan and Lease Losses

 

(91,654

)

(101,587

)

(106,796

)

(124,651

)

Net Loans

 

6,110,892

 

6,049,831

 

5,880,134

 

5,690,924

 

Total Earning Assets

 

9,188,109

 

9,163,009

 

8,996,995

 

8,723,098

 

Cash and Non-Interest-Bearing Deposits

 

296,152

 

293,115

 

225,359

 

290,974

 

Premises and Equipment

 

135,952

 

137,907

 

146,095

 

149,698

 

Customers’ Acceptance Liability

 

1,081

 

1,598

 

1,406

 

920

 

Accrued Interest Receivable

 

40,898

 

38,540

 

36,044

 

36,074

 

Foreclosed Real Estate

 

413

 

292

 

191

 

208

 

Mortgage Servicing Rights

 

18,049

 

18,239

 

18,769

 

19,995

 

Goodwill

 

34,959

 

34,959

 

36,216

 

36,216

 

Other Assets

 

369,622

 

372,031

 

305,116

 

337,626

 

Total Assets

 

$

10,085,235

 

$

10,059,690

 

$

9,766,191

 

$

9,594,809

 

Liabilities

 

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

 

Non-Interest-Bearing Demand

 

$

1,890,904

 

$

1,918,749

 

$

1,977,703

 

$

1,898,602

 

Interest-Bearing Demand

 

1,716,306

 

1,641,873

 

1,536,323

 

1,471,836

 

Savings

 

2,880,066

 

2,967,993

 

2,960,351

 

2,991,386

 

Time

 

1,269,310

 

1,198,143

 

1,090,290

 

1,051,416

 

Total Deposits

 

7,756,586

 

7,726,758

 

7,564,667

 

7,413,240

 

Securities Sold Under Agreements to Repurchase

 

756,407

 

861,233

 

568,981

 

682,630

 

Funds Purchased

 

172,365

 

63,565

 

149,635

 

69,755

 

Short-Term Borrowings

 

8,537

 

9,894

 

15,000

 

11,939

 

Banker’s Acceptances Outstanding

 

1,081

 

1,598

 

1,406

 

920

 

Retirement Benefits Payable

 

67,136

 

66,638

 

65,708

 

62,976

 

Accrued Interest Payable

 

9,416

 

8,617

 

7,021

 

6,162

 

Taxes Payable and Deferred Taxes

 

276,678

 

283,082

 

229,928

 

249,265

 

Other Liabilities

 

98,026

 

83,462

 

96,373

 

88,596

 

Long-Term Debt

 

242,692

 

242,674

 

252,638

 

252,619

 

Total Liabilities

 

9,388,924

 

9,347,521

 

8,951,357

 

8,838,102

 

Shareholders’ Equity

 

 

 

 

 

 

 

 

 

Common Stock ($.01 par value); authorized 500,000,000 shares; issued / outstanding: September 2005 - 81,722,233 / 51,282,537, June 2005 - 81,721,733 / 51,853,734, December 2004 - 81,711,752 / 54,960,857, September 2004 - 81,710,695 / 53,021,591

 

815

 

815

 

813

 

813

 

Capital Surplus

 

463,084

 

457,280

 

450,998

 

413,696

 

Accumulated Other Comprehensive Income (Loss)

 

(34,697

)

(18,471

)

(12,917

)

(5,698

)

Retained Earnings

 

1,366,058

 

1,339,119

 

1,282,425

 

1,277,615

 

Deferred Stock Grants

 

(5,974

)

(7,166

)

(8,433

)

(9,490

)

Treasury Stock, at Cost (Shares: September 2005 - 30,439,696, June 2005 - 29,867,999, December 2004 - 26,750,895, September 2004 - 28,689,104)

 

(1,092,975

)

(1,059,408

)

(898,052

)

(920,229

)

Total Shareholders’ Equity

 

696,311

 

712,169

 

814,834

 

756,707

 

Total Liabilities and Shareholders’ Equity

 

$

10,085,235

 

$

10,059,690

 

$

9,766,191

 

$

9,594,809

 

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Statements of Shareholders’ Equity (Unaudited)

 

Table 4

 

 

 

 

 

 

 

 

 

Accum.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

Common

 

Capital

 

Income

 

Retained

 

Stock

 

Treasury

 

Comprehensive

 

(dollars in thousands)

 

Total

 

Stock

 

Surplus

 

(Loss)

 

Earnings

 

Grants

 

Stock

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2004

 

$

814,834

 

$

813

 

$

450,998

 

$

(12,917

)

$

1,282,425

 

$

(8,433

)

$

(898,052

)

 

 

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

136,780

 

—

 

—

 

—

 

136,780

 

—

 

—

 

$

136,780

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Unrealized Gains and Losses on Investment Securities

 

(21,780

)

—

 

—

 

(21,780

)

—

 

—

 

—

 

(21,780

)

Total Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

115,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock Issued under Stock Plans and Related Tax Benefits (803,278 shares)

 

33,268

 

2

 

12,086

 

—

 

(1,353

)

2,459

 

20,074

 

 

 

Treasury Stock Purchased (4,478,932 shares)

 

(214,997

)

—

 

—

 

—

 

—

 

—

 

(214,997

)

 

 

Cash Dividends Paid

 

(51,794

)

—

 

—

 

—

 

(51,794

)

—

 

—

 

 

 

Balance at September 30, 2005

 

$

696,311

 

$

815

 

$

463,084

 

$

(34,697

)

$

1,366,058

 

$

(5,974

)

$

(1,092,975

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2003

 

$

793,132

 

$

807

 

$

391,701

 

$

(5,711

)

$

1,199,077

 

$

(8,309

)

$

(784,433

)

 

 

Comprehensive Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

127,098

 

—

 

—

 

—

 

127,098

 

—

 

—

 

$

127,098

 

Other Comprehensive Income, Net of Tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Unrealized Gains and Losses on Investment Securities

 

13

 

—

 

—

 

13

 

—

 

—

 

—

 

13

 

Total Comprehensive Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

127,111

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock Issued under Stock Plans and Related Tax Benefits (2,305,545 shares)

 

71,984

 

6

 

21,995

 

—

 

(434

)

(1,181

)

51,598

 

 

 

Treasury Stock Purchased (4,209,363 shares)

 

(187,394

)

—

 

—

 

—

 

—

 

—

 

(187,394

)

 

 

Cash Dividends Paid

 

(48,126

)

—

 

—

 

—

 

(48,126

)

—

 

—

 

 

 

Balance at September 30, 2004

 

$

756,707

 

$

813

 

$

413,696

 

$

(5,698

)

$

1,277,615

 

$

(9,490

)

$

(920,229

)

 

 

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Average Balances and Interest Rates - Taxable Equivalent Basis (Unaudited)

 

Table 5

 

 

 

Three Months Ended

 

Three Months Ended

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 2005

 

June 30, 2005

 

September 30, 2004 1

 

September 30, 2005

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

(dollars in millions)

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

Earning Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-Bearing Deposits

 

$

6.4

 

$

0.1

 

3.55%

 

$

6.0

 

$

—

 

2.36%

 

$

82.6

 

$

0.5

 

2.39%

 

$

5.8

 

$

0.1

 

2.69%

 

Funds Sold

 

105.7

 

0.9

 

3.54

 

23.1

 

0.2

 

2.86

 

28.6

 

0.1

 

1.51

 

47.5

 

1.2

 

3.30

 

Investment Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for Sale

 

2,574.2

 

28.5

 

4.43

 

2,542.5

 

28.0

 

4.41

 

2,325.5

 

24.6

 

4.23

 

2,536.3

 

83.9

 

4.41

 

Held to Maturity

 

507.5

 

5.1

 

4.03

 

544.1

 

5.5

 

4.06

 

659.0

 

6.3

 

3.87

 

541.8

 

16.5

 

4.05

 

Loans Held for Sale

 

17.0

 

0.3

 

5.82

 

15.1

 

0.2

 

5.72

 

11.3

 

0.2

 

5.74

 

15.1

 

0.6

 

 

 

Loans and Leases 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

984.2

 

15.8

 

6.38

 

945.0

 

14.3

 

6.07

 

815.1

 

10.7

 

5.27

 

946.6

 

43.3

 

6.12

 

Construction

 

186.4

 

3.0

 

6.35

 

140.9

 

2.1

 

5.91

 

81.1

 

1.0

 

5.01

 

150.7

 

6.7

 

5.97

 

Commercial Mortgage

 

560.2

 

8.4

 

5.95

 

599.3

 

8.8

 

5.89

 

658.9

 

8.8

 

5.29

 

588.3

 

25.8

 

5.85

 

Residential Mortgage

 

2,352.3

 

33.7

 

5.73

 

2,343.9

 

33.1

 

5.64

 

2,280.8

 

32.1

 

5.62

 

2,341.0

 

99.3

 

5.65

 

Other Revolving Credit and Installment

 

742.6

 

15.9

 

8.52

 

739.6

 

15.4

 

8.37

 

705.6

 

15.1

 

8.53

 

739.7

 

46.4

 

8.39

 

Home Equity

 

758.2

 

12.2

 

6.40

 

719.0

 

10.8

 

6.01

 

583.7

 

7.1

 

4.83

 

718.9

 

32.5

 

6.04

 

Purchased Home Equity

 

88.7

 

0.6

 

2.71

 

103.3

 

0.8

 

3.06

 

155.2

 

1.7

 

4.29

 

102.8

 

2.4

 

3.15

 

Lease Financing

 

497.7

 

4.5

 

3.55

 

499.2

 

4.7

 

3.74

 

516.0

 

5.4

 

4.17

 

499.6

 

13.9

 

3.72

 

Total Loans and Leases

 

6,170.3

 

94.1

 

6.07

 

6,090.2

 

90.0

 

5.91

 

5,796.4

 

81.9

 

5.63

 

6,087.6

 

270.3

 

5.93

 

Other

 

79.4

 

0.3

 

1.35

 

66.3

 

0.3

 

1.64

 

78.7

 

0.8

 

4.05

 

66.6

 

1.0

 

1.99

 

Total Earning Assets 3

 

9,460.5

 

129.3

 

5.44

 

9,287.3

 

124.2

 

5.35

 

8,982.1

 

114.4

 

5.08

 

9,300.7

 

373.6

 

5.36

 

Cash and Non-Interest-Bearing Deposits

 

316.1

 

 

 

 

 

305.8

 

 

 

 

 

316.9

 

 

 

 

 

312.5

 

 

 

 

 

Other Assets

 

419.4

 

 

 

 

 

376.1

 

 

 

 

 

369.5

 

 

 

 

 

391.8

 

 

 

 

 

Total Assets

 

$

10,196.0

 

 

 

 

 

$

9,969.2

 

 

 

 

 

$

9,668.5

 

 

 

 

 

$

10,005.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-Bearing Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-Bearing Deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand

 

$

1,730.7

 

2.9

 

0.66

 

$

1,667.3

 

2.4

 

0.58

 

$

1,471.0

 

0.9

 

0.24

 

$

1,672.5

 

6.9

 

0.56

 

Savings

 

2,890.2

 

5.3

 

0.73

 

2,970.8

 

4.8

 

0.65

 

2,998.4

 

3.2

 

0.43

 

2,944.1

 

14.5

 

0.66

 

Time

 

1,241.9

 

7.6

 

2.42

 

1,159.0

 

6.4

 

2.20

 

1,078.4

 

4.9

 

1.81

 

1,172.3

 

19.5

 

2.22

 

Total Interest-Bearing Deposits

 

5,862.8

 

15.8

 

1.07

 

5,797.1

 

13.6

 

0.94

 

5,547.8

 

9.0

 

0.64

 

5,788.9

 

40.9

 

0.95

 

Short-Term Borrowings

 

953.2

 

7.7

 

3.22

 

822.9

 

5.8

 

2.81

 

816.9

 

2.8

 

1.36

 

828.4

 

17.6

 

 

 

Long-Term Debt

 

242.7

 

3.8

 

6.19

 

242.7

 

3.7

 

6.16

 

246.8

 

3.8

 

6.22

 

244.7

 

11.3

 

6.16

 

Total Interest-Bearing Liabilities

 

7,058.7

 

27.3

 

1.53

 

6,862.7

 

23.1

 

1.35

 

6,611.5

 

15.6

 

0.94

 

6,862.0

 

69.8

 

1.36

 

Net Interest Income

 

 

 

$

102.0

 

 

 

 

 

$

101.1

 

 

 

 

 

$

98.8

 

 

 

 

 

$

303.8

 

 

 

Interest Rate Spread

 

 

 

 

 

3.91%

 

 

 

 

 

4.00%

 

 

 

 

 

4.14%

 

 

 

 

 

4.00%

 

Net Interest Margin

 

 

 

 

 

4.30%

 

 

 

 

 

4.36%

 

 

 

 

 

4.39%

 

 

 

 

 

4.36%

 

Non-Interest-Bearing Demand Deposits

 

1,970.9

 

 

 

 

 

1,950.2

 

 

 

 

 

1,932.0

 

 

 

 

 

1,967.9

 

 

 

 

 

Other Liabilities

 

443.7

 

 

 

 

 

439.5

 

 

 

 

 

393.4

 

 

 

 

 

435.4

 

 

 

 

 

Shareholders’ Equity

 

722.7

 

 

 

 

 

716.8

 

 

 

 

 

731.6

 

 

 

 

 

739.7

 

 

 

 

 

Total Liabilities and Shareholders’ Equity

 

$

10,196.0

 

 

 

 

 

$

9,969.2

 

 

 

 

 

$

9,668.5

 

 

 

 

 

$

10,005.0

 

 

 

 

 

 

1       Certain 2004 information has been reclassified to conform to 2005 presentation.

 

2       Non-performing loans are included in the respective average loan balances.  Income, if any, on such loans is recognized on a cash basis.

 

3       Interest income includes taxable-equivalent basis adjustment based upon a statutory tax rate of 35%.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Analysis of Change in Net Interest Income - Taxable Equivalent Basis (Unaudited)

 

Table 6

 

 

 

Three Months Ended September 30, 2005 Compared to June 30, 2005

 

(dollars in millions)

 

Volume 1

 

Rate 1

 

Time 1

 

Total

 

Change in Interest Income:

 

 

 

 

 

 

 

 

 

Interest-Bearing Deposits

 

$

—

 

$

0.1

 

$

—

 

$

0.1

 

Funds Sold

 

0.7

 

—

 

—

 

0.7

 

Investment Securities

 

 

 

 

 

 

 

 

 

Available for Sale

 

0.4

 

0.1

 

—

 

0.5

 

Held to Maturity

 

(0.4

)

—

 

—

 

(0.4

)

Loans Held for Sale

 

0.1

 

—

 

—

 

0.1

 

Loans and Leases

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

0.6

 

0.7

 

0.2

 

1.5

 

Construction

 

0.7

 

0.2

 

—

 

0.9

 

Commercial Mortgage

 

(0.6

)

0.1

 

0.1

 

(0.4

)

Residential Mortgage

 

0.1

 

0.5

 

—

 

0.6

 

Other Revolving Credit and Installment

 

0.1

 

0.2

 

0.2

 

0.5

 

Home Equity

 

0.6

 

0.7

 

0.1

 

1.4

 

Purchased Home Equity

 

(0.1

)

(0.1

)

—

 

(0.2

)

Lease Financing

 

—

 

(0.3

)

0.1

 

(0.2

)

Total Loans and Leases

 

1.4

 

2.0

 

0.7

 

4.1

 

Total Change in Interest Income

 

2.2

 

2.2

 

0.7

 

5.1

 

 

 

 

 

 

 

 

 

 

 

Change in Interest Expense:

 

 

 

 

 

 

 

 

 

Interest-Bearing Deposits

 

 

 

 

 

 

 

 

 

Demand

 

0.1

 

0.4

 

—

 

0.5

 

Savings

 

(0.2

)

0.6

 

0.1

 

0.5

 

Time

 

0.5

 

0.6

 

0.1

 

1.2

 

Total Interest-Bearing Deposits

 

0.4

 

1.6

 

0.2

 

2.2

 

Short-Term Borrowings

 

1.1

 

0.8

 

—

 

1.9

 

Long-Term Debt

 

—

 

0.1

 

—

 

0.1

 

Total Change in Interest Expense

 

1.5

 

2.5

 

0.2

 

4.2

 

 

 

 

 

 

 

 

 

 

 

Change in Net Interest Income

 

$

0.7

 

$

(0.3

)

$

0.5

 

$

0.9

 

 

1       The changes for each category of interest income and expense are allocated between the portion of changes attributable to the variance in volume, rate, or time for that category.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Salaries and Benefits (Unaudited)

 

Table 7

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

(dollars in thousands)

 

2005

 

2005 1

 

2004 1

 

2005

 

2004 1

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries

 

$

27,652

 

$

26,758

 

$

27,993

 

$

80,521

 

$

83,307

 

Incentive Compensation

 

4,385

 

3,725

 

4,383

 

12,078

 

11,459

 

Stock Based Compensation

 

1,855

 

1,828

 

2,671

 

5,398

 

8,800

 

Commission Expense

 

1,864

 

2,281

 

1,780

 

6,397

 

5,691

 

Retirement and Other Benefits

 

4,512

 

4,437

 

4,099

 

13,717

 

12,670

 

Payroll Taxes

 

2,091

 

2,205

 

2,415

 

7,749

 

8,948

 

Medical, Dental, and Life Insurance

 

1,805

 

1,823

 

2,064

 

5,859

 

6,304

 

Separation Expense

 

202

 

799

 

1,161

 

1,272

 

2,077

 

Total Salaries and Benefits

 

$

44,366

 

$

43,856

 

$

46,566

 

$

132,991

 

$

139,256

 

 

1       Certain prior information has been reclassified to conform to current presentation.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Loan Portfolio Balances (Unaudited)

 

Table 8

 

 

 

September 30,

 

June 30,

 

December 31,

 

September 30,

 

(dollars in thousands)

 

2005

 

2005 1

 

2004 1

 

2004 1

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

$

968,146

 

$

1,000,554

 

$

911,843

 

$

792,400

 

Commercial Mortgage

 

574,034

 

563,581

 

602,678

 

648,991

 

Construction

 

190,603

 

165,772

 

122,103

 

104,457

 

Lease Financing

 

468,378

 

471,600

 

479,100

 

479,063

 

Total Commercial

 

2,201,161

 

2,201,507

 

2,115,724

 

2,024,911

 

Consumer

 

 

 

 

 

 

 

 

 

Residential Mortgage

 

2,370,717

 

2,345,483

 

2,324,058

 

2,290,940

 

Home Equity

 

778,723

 

739,161

 

657,164

 

609,981

 

Purchased Home Equity

 

81,076

 

93,806

 

122,728

 

143,300

 

Other Revolving Credit and Installment

 

743,764

 

742,834

 

734,721

 

712,647

 

Lease Financing

 

27,105

 

28,627

 

32,535

 

33,796

 

Total Consumer

 

4,001,385

 

3,949,911

 

3,871,206

 

3,790,664

 

Total Loans and Leases

 

$

6,202,546

 

$

6,151,418

 

$

5,986,930

 

$

5,815,575

 

 

Air Transportation Credit Exposure 2 (Unaudited)

 

 

 

September 30, 2005

 

Dec. 31, 2004 1

 

Sept. 30, 2004

 

 

 

 

 

Unused

 

Total

 

Total

 

Total

 

(dollars in thousands)

 

Outstanding

 

Commitments

 

Exposure

 

Exposure

 

Exposure

 

United States Regional Passenger Carriers

 

$

41,206

 

$

1,656

 

$

42,862

 

$

54,981

 

$

57,505

 

United States National Passenger Carriers

 

27,816

 

—

 

27,816

 

37,377

 

37,771

 

Passenger Carriers Based Outside United States

 

21,573

 

—

 

21,573

 

25,910

 

28,540

 

Cargo Carriers

 

13,240

 

—

 

13,240

 

13,771

 

13,771

 

Total Air Transportation

 

$

103,835

 

$

1,656

 

$

105,491

 

$

132,039

 

$

137,587

 

 

1       Certain prior information has been reclassified to conform to current presentation.

 

2       Exposure includes loans, leveraged leases and operating leases.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Non-Performing Assets and Accruing Loans Past Due 90 Days or More (Unaudited)

 

Table 9

 

 

 

September 30,

 

June 30,

 

December 31,

 

September 30,

 

(dollars in thousands)

 

2005

 

2005

 

2004

 

2004

 

 

 

 

 

 

 

 

 

 

 

Non-Performing Assets

 

 

 

 

 

 

 

 

 

Non-Accrual Loans

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

$

471

 

$

430

 

$

683

 

$

775

 

Commercial Mortgage

 

1,555

 

1,739

 

2,106

 

5,552

 

Lease Financing

 

4

 

1,586

 

2,973

 

1,913

 

Total Commercial

 

2,030

 

3,755

 

5,762

 

8,240

 

Consumer

 

 

 

 

 

 

 

 

 

Residential Mortgage

 

5,083

 

6,034

 

7,688

 

7,278

 

Home Equity

 

41

 

156

 

218

 

251

 

Total Consumer

 

5,124

 

6,190

 

7,906

 

7,529

 

Total Non-Accrual Loans

 

7,154

 

9,945

 

13,668

 

15,769

 

Foreclosed Real Estate

 

413

 

292

 

191

 

208

 

Other Investments

 

683

 

683

 

—

 

—

 

Total Non-Performing Assets

 

$

8,250

 

$

10,920

 

$

13,859

 

$

15,977

 

 

 

 

 

 

 

 

 

 

 

Accruing Loans Past Due 90 Days or More

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

$

—

 

$

9

 

$

52

 

$

65

 

Commercial Mortgage

 

—

 

2,213

 

—

 

688

 

Total Commercial

 

—

 

2,222

 

52

 

753

 

Consumer

 

 

 

 

 

 

 

 

 

Residential Mortgage

 

1,545

 

1,310

 

387

 

2,588

 

Purchased Home Equity

 

83

 

—

 

183

 

97

 

Other Revolving Credit and Installment

 

1,479

 

1,417

 

1,433

 

1,533

 

Lease Financing

 

51

 

—

 

30

 

32

 

Total Consumer

 

3,158

 

2,727

 

2,033

 

4,250

 

Total Accruing Loans Past Due 90 Days or More

 

$

3,158

 

$

4,949

 

$

2,085

 

$

5,003

 

 

 

 

 

 

 

 

 

 

 

Total Loans and Leases

 

$

6,202,546

 

$

6,151,418

 

$

5,986,930

 

$

5,815,575

 

 

 

 

 

 

 

 

 

 

 

Ratio of Non-Accrual Loans to Total Loans

 

0.12%

 

0.16%

 

0.23%

 

0.27%

 

 

 

 

 

 

 

 

 

 

 

Ratio of Non-Performing Assets to Total Loans, Foreclosed Real Estate and Other Investments

 

0.13%

 

0.18%

 

0.23%

 

0.27%

 

 

 

 

 

 

 

 

 

 

 

Ratio of Non-Performing Assets and Accruing Loans Past Due 90 Days or More to Total Loans

 

0.18%

 

0.26%

 

0.27%

 

0.36%

 

 

 

 

 

 

 

 

 

 

 

Quarter to Quarter Changes in Non-Performing Assets

 

 

 

 

 

 

 

 

 

Balance at Beginning of Quarter

 

$

10,920

 

$

13,365

 

$

15,977

 

$

21,160

 

Additions

 

919

 

3,088

 

5,164

 

2,094

 

Reductions

 

 

 

 

 

 

 

 

 

Payments

 

(1,326

)

(5,097

)

(6,435

)

(1,386

)

Return to Accrual

 

(2,007

)

(392

)

(456

)

(1,122

)

Sales of Foreclosed Assets

 

—

 

—

 

(206

)

(682

)

Charge-offs/Write-downs

 

(256

)

(44

)

(185

)

(88

)

Transfer to Premises

 

—

 

—

 

—

 

(3,999

)

Total Reductions

 

(3,589

)

(5,533

)

(7,282

)

(7,277

)

Balance at End of Quarter

 

$

8,250

 

$

10,920

 

$

13,859

 

$

15,977

 

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Consolidated Reserve for Credit Losses (Unaudited)

 

Table 10

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

(dollars in thousands)

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

Balance at Beginning of Period

 

$

106,163

 

$

124,904

 

$

113,596

 

$

129,080

 

Loans Charged-Off

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

620

 

227

 

1,775

 

3,942

 

Commercial Mortgage

 

—

 

—

 

—

 

574

 

Lease Financing

 

10,049

 

—

 

10,049

 

607

 

Consumer

 

 

 

 

 

 

 

 

 

Residential Mortgage

 

130

 

226

 

512

 

690

 

Home Equity

 

—

 

11

 

—

 

20

 

Purchased Home Equity

 

26

 

173

 

723

 

464

 

Other Revolving Credit and Installment

 

4,488

 

4,268

 

13,617

 

13,487

 

Lease Financing

 

6

 

45

 

69

 

109

 

Total Loans Charged-Off

 

15,319

 

4,950

 

26,745

 

19,893

 

Recoveries on Loans Previously Charged-Off

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

528

 

1,206

 

1,281

 

3,431

 

Commercial Mortgage

 

146

 

1,093

 

240

 

1,933

 

Construction

 

—

 

94

 

—

 

529

 

Lease Financing

 

—

 

2

 

162

 

18

 

Consumer

 

 

 

 

 

 

 

 

 

Residential Mortgage

 

190

 

207

 

485

 

805

 

Home Equity

 

4

 

14

 

34

 

154

 

Purchased Home Equity

 

126

 

51

 

281

 

108

 

Other Revolving Credit and Installment

 

1,322

 

1,502

 

3,775

 

4,868

 

Lease Financing

 

7

 

9

 

58

 

80

 

Foreign

 

—

 

519

 

—

 

7,038

 

Total Recoveries on Loans Previously Charged-Off

 

2,323

 

4,697

 

6,316

 

18,964

 

Net Loan Charge-Offs

 

(12,996

)

(253

)

(20,429

)

(929

)

Provision for Credit Losses

 

3,000

 

—

 

3,000

 

(3,500

)

Balance at End of Period 1

 

$

96,167

 

$

124,651

 

$

96,167

 

$

124,651

 

 

 

 

 

 

 

 

 

 

 

Components

 

 

 

 

 

 

 

 

 

Allowance for Loan and Lease Losses

 

$

91,654

 

$

124,651

 

$

91,654

 

$

124,651

 

Reserve for Unfunded Commitments 2

 

4,513

 

—

 

4,513

 

—

 

Total Reserve for Credit Losses

 

$

96,167

 

$

124,651

 

$

96,167

 

$

124,651

 

 

 

 

 

 

 

 

 

 

 

Average Loans Outstanding

 

$

6,170,302

 

$

5,796,350

 

$

6,087,629

 

$

5,770,642

 

 

 

 

 

 

 

 

 

 

 

Ratio of Net Loan Charge-Offs to Average Loans Outstanding (annualized)

 

0.84%

 

0.02%

 

0.45%

 

0.02%

 

Ratio of Allowance to Loans and Leases Outstanding 2

 

1.48%

 

2.14%

 

1.48%

 

2.14%

 

 

1  Included in this analysis is activity related to the Company’s reserve for unfunded commitments, which is separately recorded in other liabilities in the Consolidated Statements of Condition.

 

2  The reclassification of the reserve for unfunded commitments to other liabilities occurred in the fourth quarter of 2004 on a prospective basis.  Thus, September 30, 2004 allowance for loan and lease losses and reserve for unfunded commitments were reported together.  At September 30, 2004, the reserve for unfunded commitments was $6.7 million.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Business Segment Selected Financial Information (Unaudited)

 

Table 11a

 

 

 

 

 

 

 

Investment

 

Treasury

 

 

 

 

 

Retail

 

Commercial

 

Services

 

and Other

 

Consolidated

 

(dollars in thousands)

 

Banking

 

Banking

 

Group

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

56,549

 

$

36,017

 

$

3,223

 

$

6,171

 

$

101,960

 

Provision for Credit Losses

 

2,946

 

10,564

 

—

 

(10,510

)

3,000

 

Net Interest Income After Provision for Credit Losses

 

53,603

 

25,453

 

3,223

 

16,681

 

98,960

 

Non-Interest Income

 

25,595

 

13,385

 

14,097

 

2,439

 

55,516

 

 

 

79,198

 

38,838

 

17,320

 

19,120

 

154,476

 

Non-Interest Expense

 

(44,517

)

(22,025

)

(15,683

)

(2,371

)

(84,596

)

Income Before Income Taxes

 

34,681

 

16,813

 

1,637

 

16,749

 

69,880

 

Provision for Income Taxes

 

(12,832

)

(6,327

)

(606

)

(5,286

)

(25,051

)

Allocated Net Income

 

21,849

 

10,486

 

1,031

 

11,463

 

44,829

 

Allowance Funding Value

 

(178

)

(586

)

(5

)

769

 

—

 

GAAP Provision

 

2,946

 

10,564

 

—

 

(10,510

)

3,000

 

Economic Provision

 

(3,364

)

(2,410

)

(105

)

(1

)

(5,880

)

Tax Effect of Adjustments

 

221

 

(2,800

)

41

 

3,604

 

1,066

 

Income Before Capital Charge

 

21,474

 

15,254

 

962

 

5,325

 

43,015

 

Capital Charge

 

(5,569

)

(4,645

)

(1,548

)

(8,113

)

(19,875

)

Net Income (Loss) After Capital Charge (NIACC)

 

$

15,905

 

$

10,609

 

$

(586

)

$

(2,788

)

$

23,140

 

 

 

 

 

 

 

 

 

 

 

 

 

RAROC (ROE for the Company)

 

42%

 

36%

 

7%

 

16%

 

25%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets at September 30, 2005

 

$

3,829,656

 

$

2,538,084

 

$

184,757

 

$

3,532,738

 

$

10,085,235

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2004 1

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

51,329

 

$

33,967

 

$

2,889

 

$

10,594

 

$

98,779

 

Provision for Credit Losses

 

2,121

 

(847

)

(1

)

(1,273

)

—

 

Net Interest Income After Provision for Credit Losses

 

49,208

 

34,814

 

2,890

 

11,867

 

98,779

 

Non-Interest Income

 

22,430

 

15,350

 

12,812

 

2,462

 

53,054

 

 

 

71,638

 

50,164

 

15,702

 

14,329

 

151,833

 

Non-Interest Expense

 

(43,605

)

(23,019

)

(13,632

)

(3,934

)

(84,190

)

Income Before Income Taxes

 

28,033

 

27,145

 

2,070

 

10,395

 

67,643

 

Provision for Income Taxes

 

(10,372

)

(10,069

)

(766

)

(3,369

)

(24,576

)

Allocated Net Income

 

17,661

 

17,076

 

1,304

 

7,026

 

43,067

 

Allowance Funding Value

 

(166

)

(621

)

(6

)

793

 

—

 

GAAP Provision

 

2,121

 

(847

)

(1

)

(1,273

)

—

 

Economic Provision

 

(3,584

)

(2,467

)

(86

)

(1

)

(6,138

)

Tax Effect of Adjustments

 

602

 

1,456

 

34

 

179

 

2,271

 

Income Before Capital Charge

 

16,634

 

14,597

 

1,245

 

6,724

 

39,200

 

Capital Charge

 

(5,441

)

(4,824

)

(1,344

)

(8,515

)

(20,124

)

Net Income (Loss) After Capital Charge (NIACC)

 

$

11,193

 

$

9,773

 

$

(99

)

$

(1,791

)

$

19,076

 

 

 

 

 

 

 

 

 

 

 

 

 

RAROC (ROE for the Company)

 

33%

 

33%

 

10%

 

20%

 

23%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets at September 30, 2004

 

$

3,711,048

 

$

2,295,901

 

$

124,943

 

$

3,462,917

 

$

9,594,809

 

 

1       Certain 2004 information has been reclassified to conform to 2005 presentation.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Business Segment Selected Financial Information (Unaudited)

 

Table 11b

 

 

 

 

 

 

 

Investment

 

Treasury

 

 

 

 

 

Retail

 

Commercial

 

Services

 

and Other

 

Consolidated

 

(dollars in thousands)

 

Banking

 

Banking

 

Group

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

163,111

 

$

106,105

 

$

9,334

 

$

25,107

 

$

303,657

 

Provision for Credit Losses

 

9,962

 

11,216

 

(1

)

(18,177

)

3,000

 

Net Interest Income After Provision for Credit Losses

 

153,149

 

94,889

 

9,335

 

43,284

 

300,657

 

Non-Interest Income

 

74,917

 

33,651

 

42,952

 

6,985

 

158,505

 

 

 

228,066

 

128,540

 

52,287

 

50,269

 

459,162

 

Non-Interest Expense

 

(130,135

)

(65,604

)

(42,594

)

(6,130

)

(244,463

)

Income Before Income Taxes

 

97,931

 

62,936

 

9,693

 

44,139

 

214,699

 

Provision for Income Taxes

 

(36,235

)

(23,326

)

(3,586

)

(14,772

)

(77,919

)

Allocated Net Income

 

61,696

 

39,610

 

6,107

 

29,367

 

136,780

 

Allowance Funding Value

 

(509

)

(1,788

)

(17

)

2,314

 

—

 

GAAP Provision

 

9,962

 

11,216

 

(1

)

(18,177

)

3,000

 

Economic Provision

 

(10,304

)

(7,300

)

(298

)

(3

)

(17,905

)

Tax Effect of Adjustments

 

315

 

(787

)

117

 

5,871

 

5,516

 

Income Before Capital Charge

 

61,160

 

40,951

 

5,908

 

19,372

 

127,391

 

Capital Charge

 

(16,449

)

(13,842

)

(4,317

)

(26,436

)

(61,044

)

Net Income (Loss) After Capital Charge (NIACC)

 

$

44,711

 

$

27,109

 

$

1,591

 

$

(7,064

)

$

66,347

 

 

 

 

 

 

 

 

 

 

 

 

 

RAROC (ROE for the Company)

 

41%

 

33%

 

15%

 

16%

 

25%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets at September 30, 2005

 

$

3,829,656

 

$

2,538,084

 

$

184,757

 

$

3,532,738

 

$

10,085,235

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2004 1

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

 

$

151,010

 

$

101,569

 

$

8,533

 

$

29,547

 

$

290,659

 

Provision for Credit Losses

 

7,455

 

1,630

 

47

 

(12,632

)

(3,500

)

Net Interest Income After Provision for Credit Losses

 

143,555

 

99,939

 

8,486

 

42,179

 

294,159

 

Non-Interest Income

 

67,833

 

37,923

 

40,238

 

10,750

 

156,744

 

 

 

211,388

 

137,862

 

48,724

 

52,929

 

450,903

 

Non-Interest Expense

 

(131,382

)

(69,092

)

(39,888

)

(11,975

)

(252,337

)

Income Before Income Taxes

 

80,006

 

68,770

 

8,836

 

40,954

 

198,566

 

Provision for Income Taxes

 

(29,602

)

(25,450

)

(3,269

)

(13,147

)

(71,468

)

Allocated Net Income

 

50,404

 

43,320

 

5,567

 

27,807

 

127,098

 

Allowance Funding Value

 

(442

)

(2,045

)

(20

)

2,507

 

—

 

GAAP Provision

 

7,455

 

1,630

 

47

 

(12,632

)

(3,500

)

Economic Provision

 

(10,489

)

(8,065

)

(279

)

(6

)

(18,839

)

Tax Effect of Adjustments

 

1,286

 

3,138

 

93

 

3,749

 

8,266

 

Income Before Capital Charge

 

48,214

 

37,978

 

5,408

 

21,425

 

113,025

 

Capital Charge

 

(16,696

)

(15,218

)

(3,934

)

(26,465

)

(62,313

)

Net Income (Loss) After Capital Charge (NIACC)

 

$

31,518

 

$

22,760

 

$

1,474

 

$

(5,040

)

$

50,712

 

 

 

 

 

 

 

 

 

 

 

 

 

RAROC (ROE for the Company)

 

32%

 

27%

 

15%

 

24%

 

22%

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets at September 30, 2004

 

$

3,711,048

 

$

2,295,901

 

$

124,943

 

$

3,462,917

 

$

9,594,809

 

 

1       Certain 2004 information has been reclassified to conform to 2005 presentation.

 


 

Bank of Hawaii Corporation and Subsidiaries

 

 

Quarterly Summary of Selected Consolidated Financial Data (Unaudited)

 

Table 12

 

 

 

Three Months Ended

 

 

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

September 30,

 

(dollars in thousands except per share amounts)

 

2005

 

2005

 

2005

 

2004

 

2004 1

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Operating Results

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

 

 

 

 

 

 

 

 

 

Interest and Fees on Loans and Leases

 

$

94,381

 

$

90,119

 

$

86,467

 

$

84,100

 

$

82,079

 

Income on Investment Securities - Available for Sale

 

28,482

 

27,987

 

27,319

 

26,394

 

24,543

 

Income on Investment Securities - Held to Maturity

 

5,109

 

5,527

 

5,825

 

6,147

 

6,370

 

Deposits

 

57

 

36

 

23

 

107

 

496

 

Funds Sold

 

935

 

165

 

75

 

356

 

108

 

Other

 

270

 

271

 

449

 

267

 

801

 

Total Interest Income

 

129,234

 

124,105

 

120,158

 

117,371

 

114,397

 

Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

15,766

 

13,577

 

11,604

 

9,993

 

8,990

 

Securities Sold Under Agreements to Repurchase

 

6,796

 

4,562

 

3,325

 

3,120

 

2,085

 

Funds Purchased

 

901

 

1,151

 

733

 

395

 

683

 

Short-Term Borrowings

 

50

 

45

 

32

 

39

 

15

 

Long-Term Debt

 

3,761

 

3,731

 

3,806

 

3,893

 

3,845

 

Total Interest Expense

 

27,274

 

23,066

 

19,500

 

17,440

 

15,618

 

Net Interest Income

 

101,960

 

101,039

 

100,658

 

99,931

 

98,779

 

Provision for Credit Losses

 

3,000

 

—

 

—

 

(6,500

)

—

 

Net Interest Income After Provision for Credit Losses

 

98,960

 

101,039

 

100,658

 

106,431

 

98,779

 

Non-Interest Income

 

 

 

 

 

 

 

 

 

 

 

Trust and Asset Management

 

14,052

 

14,058

 

14,622

 

13,934

 

12,672

 

Mortgage Banking

 

2,618

 

2,594

 

2,590

 

1,516

 

1,711

 

Service Charges on Deposit Accounts

 

10,046

 

9,569

 

10,179

 

10,155

 

9,472

 

Fees, Exchange, and Other Service Charges

 

15,394

 

15,211

 

13,836

 

13,684

 

13,741

 

Investment Securities Gains (Losses)

 

8

 

337

 

—

 

(757

)

—

 

Insurance

 

5,324

 

4,330

 

5,788

 

4,234

 

5,423

 

Other

 

8,074

 

4,575

 

5,300

 

5,584

 

10,035

 

Total Non-Interest Income

 

55,516

 

50,674

 

52,315

 

48,350

 

53,054

 

Non-Interest Expense

 

 

 

 

 

 

 

 

 

 

 

Salaries and Benefits

 

44,366

 

43,856

 

44,769

 

45,043

 

46,566

 

Net Occupancy

 

9,896

 

9,189

 

9,545

 

9,606

 

9,812

 

Net Equipment

 

5,335

 

5,377

 

5,471

 

6,316

 

5,847

 

Professional Fees

 

5,689

 

2,905

 

3,051

 

3,580

 

3,428

 

Other

 

19,310

 

17,677

 

18,027

 

17,558

 

18,537

 

Total Non-Interest Expense

 

84,596

 

79,004

 

80,863

 

82,103

 

84,190

 

Income Before Income Taxes

 

69,880

 

72,709

 

72,110

 

72,678

 

67,643

 

Provision for Income Taxes

 

25,051

 

26,280

 

26,588

 

26,437

 

24,576

 

Net Income

 

$

44,829

 

$

46,429

 

$

45,522

 

$

46,241

 

$

43,067

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share

 

$

0.87

 

$

0.90

 

$

0.85

 

$

0.86

 

$

0.82

 

Diluted Earnings Per Share

 

$

0.85

 

$

0.87

 

$

0.83

 

$

0.82

 

$

0.78

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Totals

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

10,085,235

 

$

10,059,690

 

$

9,908,030

 

$

9,766,191

 

$

9,594,809

 

Net Loans

 

6,110,892

 

6,049,831

 

5,910,784

 

5,880,134

 

5,690,924

 

Total Deposits

 

7,756,586

 

7,726,758

 

7,760,662

 

7,564,667

 

7,413,240

 

Total Shareholders’ Equity

 

696,311

 

712,169

 

716,656

 

814,834

 

756,707

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance Ratios

 

 

 

 

 

 

 

 

 

 

 

Net Income to Average Total Assets (ROA)

 

1.74%

 

1.87%

 

1.88%

 

1.89%

 

1.77%

 

Net Income to Average Shareholders’ Equity (ROE)

 

24.61

 

25.98

 

23.66

 

23.63

 

23.42

 

Efficiency Ratio 2

 

53.72

 

52.07

 

52.86

 

55.37

 

55.45

 

 

1       Certain 2004 information has been reclassified to conform to 2005 presentation.

 

2       The efficiency ratio is defined as non-interest expense divided by total revenue (net interest income and non-interest income).